The Critical Success Factors in the Global Consumer Microprocessor Market: The Case of Intel vs.. The CPU is pervasive in every form of electronic device from the LCD TV to the cellphone
Trang 1The Critical Success Factors in the Global Consumer Microprocessor
Market: The Case of Intel vs AMD examined
Crian Padayachee Master of Science in International Business
Portobello College – Dublin University of Wales ‐ Cardif Supervisor: Shay Lynch
Trang 2This work has not previously been accepted in substance for any degree and is not being concurrently submitted in candidature for any degree.
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This dissertation is the result of my own independent work and investigation, except where otherwise stated Other sources are acknowledged by footnotes giving explicit references A bibliography is appended.
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Trang 3Acknowledgements:
I would like to acknowledge the many people that assisted me during my Dissertation process This process has been far from what I expected and I would have never been able to produce the final document without the support from my supervisor, friends and family.
I would especially like to thank my supervisor Shay Lynch who contributed his valuable time into ensuring that I never veered down the wrong path during the writing process He always made sure that
I looked at the subject from a broad perspective while encouraging my critical thinking so that both sides of any argument were examined His direction and valuable insight proved critical throughout the entire process and for that I will be eternally grateful.
Additionally I would like to thank my friends back home in the USA and here in Ireland for providing support at so many different levels I am very grateful to my best friend Chi Cheng whose cheerful demeanor and attitude always ensured that no matter how frustrated I was in my dissertation process, that I remained focused on its completion.
Any acknowledgements would be remiss without some mention of family therefore I would like to thank
my two brothers Kevin and Dashen who throughout the past 6 months have allowed me to bounce ideas off their heads to ensure that I explored this topic in its entirety.
Crian Padayachee
Trang 4Society today is filled with one ubiquitous word and that is the microprocessor, also known as the CPU in more formal terminology The CPU is pervasive in every form of electronic device from the LCD TV to the cellphone and it was the researchers aim to understand the global consumer microprocessor industry in the context of the two dominant companies which are Intel Corporation and AMD (Advanced Micro Devices) AMD started one year after Intel however in 2007 both of these companies have drastically different performances and it was the researchers aim to compare and contrast these companies in the light of the critical success factors that this industry requires.
The researcher defines success with reference to the semi conductor ‐ industry as the positive progress made by a company in creating sustainable competitive advantage even if immediate profits are not realized Critical success can then be defined as the factors of success that a company should prioritize in order to proceed in a constructive direction With the critical success factors defined, the researcher determined that a mixed method ‐ survey instrument would be used encompassing both qualitative and quantitative questions The survey was constructed using the conclusions from the literature review and various polls in order for the most accurate survey instrument possible to be constructed This survey was created online and received a total of 362 responses with 250 respondents making it to the end of the survey The survey data was then analyzed whereby congruent responses were mapped onto a pie chart in order to illustrate the most significant factors with regards to the consumer microprocessor industry.
The analyzed data from the survey revealed that AMD needs to better manage its collaborators while paying attention to the consumer to ensure that they never underestimate the desires of the market.
Trang 5Table of Contents
1 Introduction 1
1.1 The Overview of the Current Global Consumer Microprocessor Market 1
1.2 Analytical Steps in Topic Discussion 2
1.3 Previous History of AMD and Intel 3
1.4 Designing the Research Program 7
1.5 Explanation of the Primary Research Question 10
1.6 Preliminary Survey Construction and Issues 11
2 Literature Review 16
2.1The Global Consumer Microprocessor Strategy 16
2.2 Is Innovation the Key to Success? 19
2.3 The Customer Centric Approach 20
2.4 How to Manage Business Collaborators 23
2.5 The Truth behind First Mover Advantage 26
2.6 End Consumer ‐ Rationale and Behavior 28
2.6.1 The IBM CDP Model 31
3 Analysis and Discussion 34
3.1 Post Survey Analysis and Response Rates 34
3.2 Geographical Breakdown of Respondents 35
3.3 Age and Income Distribution 37
3.4 Major Deciding Factors in the Last Computer Purchase? 42
3.5 Price as a Purchase Influence 46
3.6 Intel/AMD Open Answer Discussion 47
4 Conclusions and Recommendations 49
4.1 Key Success Factors in the Global Consumer Microprocessor Market 49
4.2 Recommendations for AMD 53
Trang 64.3 Recommendations for Future Research 54
5 References 56
Appendices 58
Appendix 1 59
Processor Benchmarks 59
Appendix 2 60
CPU Charts (Tomshardware: July 16, 2007) 60
Appendix 3 63
Definition of the Average Consumer 63
Appendix 4 64
Illustrative CDP Model 64
Appendix 5 65
Dell Ireland 2007 September Flyer 65
Appendix 6 67
Maylor and Blackmon Research Diagram 67
Appendix 7 68
Facebook Polls 68
Appendix 8 72
Neowin Processor Polls 72
Appendix 9 73
Original Survey Questionnaire 73
Appendix 10 78
Post Survey Analysis 78
Appendix 11 81
Pending Litigation: AMD vs Intel 81
Appendix 12 83
Comparative Spreadsheet: Intel vs AMD 83
Appendix 13 85
Glossary of Terminology 85
Trang 7Chapter One Introduction
1.1 The Overview of the Current Global Consumer Microprocessor Market
Futurists like Isaac Asimov, Robert Heinlein and perhaps even Gene Roddenberry were the first
to imagine a future controlled by machines, and that is essentially what exists today Processors drive our automated society and are essential in almost every popular consumer device such as Cellphones, PDA’s, MP3 Players and your LCD TV 41 Years ago, Gene Roddenberry created what the world knows today as Star Trek, the world’s most famous science fiction show This series started in 1966 and is still being shown on television stations around the world 41 years later because it has helped inspire the minds of generations to come These generations have helped create the technological advances we take for granted today such as the LCD TV Star Trek predicted the rise of the cellphone also known as the “com badge” and the essential nature of the computer Often in the show, you will hear people asking the computer via voice activation to perform certain tasks which are done in seconds however we are a few generations from that sort of efficiency This processing power is not a distant goal due to Moore’s Law which predicts that the numbers of transistors will double every two years on a processor(Moore 2003) The transistors are what give the piece of silicon that we call a processor the power to play games and send email Eventually every person will have the equivalent of a supercomputer in their house automating tasks and responding to numerous other questions This potential future could not be possible without the invention of the first single chip microprocessor by Intel Corporation in November of 1971 This processor was known as the Intel 4004 and was developed by a team of engineers who had no idea how important their invention would be to society decades later(Ceruzzi 2003)
Despite Intel having invented the very first processor in the world, they are not the only processor manufacturer in the modern world today In the late 20th century, there were three manufacturers in the market with Intel clearly dominating but at the end of the century, Cyrix merged with national semiconductor and no longer participated in the global consumer
7
Trang 8microprocessor market That left AMD (Advanced Micro Devices) and Intel Corporation to battle it out for the consumer processor market
AMD was founded in 1969(AMD 2006) by Jerry Sanders who always maintained that
“customers should come first, at every stage of a company’s activities.” It was that concept that allowed AMD to grow from an initially small market share to 23.3% of all processors shipped worldwide in 2006(Krazit 2006) However, despite this significant market share gain, Intel still has what encyclopedia Britannica defines as a realistic monopoly whereby it is able to increase its price in order to maximize profits regardless of market conditions(Britannica 2007) This monopoly existed in part due to Intel having developed the first processor and having significantly more resources than AMD has retained at any point in history yet AMD has slowly but surely managed to gain market share against its larger competitor (Appendix 12).
1.2 Analytical Steps in Topic Discussion
This area of research was chosen because many of the mainstream technology writers, financial analysts and other media outlets have attributed the success of AMD or Intel to sheer technological innovation yet we know from companies like HP who used to focus on innovation that it is only part of a company’s success and definitely not the source of success for any company in the modern business era(Deshpande 2005) Some of the other areas that contribute to a company’s success include: marketing strategy, strategic management, partnerships with the big retailers and general consumer behavior The previous areas of success are a statement of the researcher’s beliefs with regards to the general success factors for all organizations Dr Rosabeth Kanter recently wrote in the Harvard Business Review that
“Every few years, innovation resurfaces as a prime focus of growth strategies And when it does, companies repeat the mistakes they made the last time.”(Kanter 2006) This quote is an example of the competitive battle between AMD and Intel during the past six years Using the above quotation as guidance for this exploratory study, the researcher will explore the strategies utilized by AMD and Intel in order to grow and succeed within the global consumer microprocessor market (GCMM) This research can be broken down into four other smaller
Trang 9questions that will allow me to gauge the other contributing factors towards the success of both of these companies in the GCMM These questions are:
• Is strategic management the key differentiating factor between Intel and AMD?
• What are the key success factors behind the performance gap between AMD and Intel? What differentiates these two companies in this regard?
• How significant a factor are consumer perceptions of the companies on the
consumer processor marketplace? Do these consumer perceptions influence
success?
• How can AMD grow its market share in the consumer market?
The researcher will answer these questions using academic frameworks combined with his own insight and analysis in order to comprehensively refine these questions into researchable form This approach will allow me to evaluate the effectiveness of the current strategies employed by Intel/AMD and their overall success Initially it is the researcher’s intention to examine the innovation concept again in a bit more detail before proceeding with a review of other academic concepts
After a strategic innovation picture of these two companies is acquired, the next step will be to analyze the marketing operations with regards to the consumer Selden and Macmillan developed a comprehensive process that will allow us to determine whether AMD or Intel truly have a customer centric approach which is a concept that they term as essential in the modern globalized business environment(Selden and MacMillan 2006) Lastly the various supplier, retailer and consumer relationships will be discussed using the analytical framework developed
by Yoffie and Kwak This framework will allow us to analyze whether the complementary relationships that exist between hardware and software manufacturers are being utilized in the most efficient way to deliver critical value for AMD and Intel
Trang 101.3 Previous History of AMD and Intel
The researcher has chosen these pieces of academic literature to be the basis for this research
in order to create a solid academic foundation from which to accurately answer the earlier research questions At this point before delving further into a review of literature relevant to the topic of the success of AMD and Intel in the processor market it is essential to understand
in brief what events have occurred in the last 6 years AMD finally caught up to Intel when they released the first 64bit processor for the consumer market, months before Intel intended to released theirs in September, 2003 and consequently this processor defeated Intel’s Pentium 4
in subsequent benchmarking tests (See Appendix 1) Later on when Intel thought they would get the upper hand by releasing the first dual core processor (two processors on one chip) the Pentium D, AMD beat Intel again by releasing their X2 which defeated Intel’s Pentium D in all the relevant benchmarks (See Appendix 1) After two successive defeats Intel realized that unless they created processors that answered consumer needs, AMD would continue to defeat them in both the consumer and business market
Intel defeated AMD in both the business and consumer market in mid 2006 with the release of their Core 2 Duo™ line of processors Not only were these processors more efficient (See Appendix 1) than AMD’s, they also managed to compete on a power and cost basis at the same time With that being said, the market is still pretty competitive for both AMD and Intel yet according to the Orange County Business Journal in California, Intel is not supposed to be fully being able to appreciate its success until mid 2007 due to the accumulation of unsold Pentium 4 and Pentium D chips (Womack 2006) This success can be seen in Appendix 12 where Intel has demonstrated record profits in the second quarter of 2007
The most publicized facet of the successful processor market is the speed at which innovation has occurred A new line of processors or even single products comes out at least every half year, in the last two years we have gone from a single core on a processor to four cores in 2007 but despite this innovation, the software applications to be able to use all this innovation are few and far between Despite the lack of software to support these applications, consumers